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Macquarie Research thinks casinos in Las Vegas are in better shape to handle an economic downturn than they have been in the past due to leaner cost structures and tight supply in the market.

Analyst Chad Beynon and team also pointed to strong pent-up demand for work travel and conferences, which are expected to help counterbalance a softer leisure consumer. Vegas searches are also noted to show continued growth.

“Despite fears around peak Las Vegas demand, our monthly survey highlights continued visitation demand into the fall. Overall searches were +3% MoM in July, following 6%/5% in May/June, with continued strength in the Aug/Sept search periods. Visitation in Feb-June was less than 10% off ’19 levels.”

Macquarie’s view on the casino sector is that while gross gaming revenue and margins will bring attention, the recent round of earnings reports showed how non-gaming revenue can drive higher EBITDA for the group with MGM Resorts (NYSE:MGM), Caesars Entertainment (CZR), and Wynn Resorts (WYNN) all reporting Vegas occupancy rates over 90%.

Las Vegas revenue mix: MGM Resorts (MGM) has the highest revenue exposure to Las Vegas at 47%, followed by Caesars Entertainment (CZR) at 45%, Vici Properties VICI) at 30%, Golden Entertainment (GDEN) at 25%, and Wynn Resorts at 23%. Boyd Gaming (BYD) and Red Rock Resorts (RRR) also have indirect exposure to Strip spill-over.

See which casino stocks have the highest Seeking Alpha Quant Ratings.

Compare valuation and profitability metrics on MGM, CZR, and WYNN.


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